Economic Implications Of Japan Tsunami, Earthquake and Nuclear Crisis : Planet Money Is the crisis in Japan an economic disaster? And what will it mean for the U.S. economy?

Q&A: The Economic Impact Of The Crisis In Japan

Q&A: The Economic Impact Of The Crisis In Japan

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Is the crisis in Japan an economic disaster?

Since World War II, Japan has developed a very advanced and resilient economy. That means that when this crisis is over, it's unlikely that there will be serious long-term economic impacts. The region affected accounts for only 4 percent of the country's gross domestic product, and it's only part of the region that's affected. The main question mark at this point is the situation with the nuclear reactors.

Will the rebuilding effort be a sort of economic stimulus?

It is true that when you rebuild, you often see a bump in GDP. You are hiring people to rebuild those roads, rebuild those houses. But the money has to come from somewhere. That means Japan's going to have to raise taxes, or cut spending elsewhere, or borrow more money.

What will this mean for Japan's debt?

Japan is one of the most indebted countries in the world. But people are still willing to lend money to Japan. The government can borrow money at a very low rate right now. It does seem that when the time comes to rebuild, the country will be able to borrow money if they need to.

What will the effect of this be on the U.S. economy?

Companies after previous natural disasters have really become obsessed with diversifying their supply chain — making sure they have multiple places to buy the things they need. There's a lot of redundancy in the system. You might expect some short-term disruptions, but these things tend to fix themselves relatively quickly.

The most recent major disaster in Japan was the Kobe earthquake of 1995. What were the economic consequences of that?

I have a chart of Japan's GDP, and if you look it's very hard to find the impact of the Kobe earthquake there. GDP increased after the Kobe earthquake.

But GDP doesn't measure lost buildings, it doesn't measure lost houses, it doesn't measure lost lives. There are an awful lot of things that just do not show up in the economic data.